Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Thursday he remains confident major credit rating agencies Moody’s Investors Service, Fitch Ratings and S&P Global Ratings will keep their investment-grade ratings for the Philippines despite the country’s rising debt-to-GDP ratio.
“Definitely, the debt-to-GDP ratio is rising but it is within [or below] the threshold [or international standard] of 60 percent [debt to GDP ratio]. But we are very careful of that,” Diokno said in an online briefing Thursday.
The latest data showed the government’s debt-to-GDP ratio rose from 39.6 percent in 2019 to 54.5 percent in 2020 as the government borrowed more money to fund COVID-19 response efforts.
Credit ratings agencies earlier cited the country’s low debt ratios as one of the reasons for their decisions to retain the Philippines’ credit ratings. The government’s debt stock hit a new high of P10.41 trillion as of February 2021.
Diokno said the Philippines was in a better position compared to neighboring countries. “So there is no fear that we can be downgraded [by the credit rating agencies],” he said.
The country’s foreign debt as of end 2020 reached $98.5 billion, up by $14.9 billion from $83.6 billion in 2019. The end-2020 external debt figure represented 27.2 percent of the country’s GDP.
The latest ratio also indicates the country’s sustained strong position to service foreign borrowings.
Data showed that in addition to implementing monetary policy easing and liquidity measures, the Monetary Board approved $15.5 billion in foreign borrowings as of May 7, 2021 to support government efforts to ease the impact of the pandemic. Of these, $1.2 billion will be used for the procurement of COVID-19 vaccines.
The borrowings were sourced from bond issuances ($5.1 billion), the Asian Development Bank ($4.3 billion), World Bank-International Bank for Reconstruction and Development ($3.7 billion), Asian Infrastructure and Investment Bank ($1.1 billion), Japan International Cooperation Agency ($942 million), Agence Francaise de Developpement Bank ($283 million) and Export-Import Bank of Korea ($100 million).
Finance Secretary Carlos Dominguez III said Wednesday the country maintained its strong fiscal position by ensuring that the government could always afford to pay foreign borrowings.
Dominguez said in a statement government borrowings used for such productive investments such as infrastructure projects that spur growth and create jobs are beneficial, rather than a burden to economic development.
He said foreign borrowings to help fund the country’s unplanned expenditures for COVID-19 response were also well spent to provide emergency assistance to vulnerable families and other pandemic-hit sectors of the economy; boost the country’s healthcare capacity; keep the economy afloat and support quick recovery.